The Great Reversal in the Demand for Skill and Cognitive Tasks
What explains the current low rate of employment in the US? While there has been substantial debate over this question in recent years, we believe that considerable added insight can be derived by focusing on changes in the labor market at the turn of the century. In particular, we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together. In order to understand these patterns, we offer a simple extension to the standard skill biased technical change model that views cognitive tasks as a stock rather than a flow. We show how such a model can explain the trends in the data that we present, and offers a novel interpretation of the current employment situation in the US.
This paper has been prepared for the conference on May 17-18 2013 entitled "The Labor Market after the Great Recession" organized by Alex Mas and David Card. Paul Beaudry thanks the Social Science and Humanities Research Council of Canada and the Bank of Canada for financial support. David Green thanks the Social Science and Humanities Research Council of Canada for financial support. Ben Sand thanks York University for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
The Great Reversal in the Demand for Skill and Cognitive Tasks, Paul Beaudry, David A. Green, Benjamin M. Sand. in Labor Markets in the Aftermath of the Great Recession, Card and Mas. 2016
Paul Beaudry & David A. Green & Benjamin M. Sand, 2016. "The Great Reversal in the Demand for Skill and Cognitive Tasks," Journal of Labor Economics, vol 34(S1), pages S199-S247.